QVC Network Inc. Chairman Barry Diller took his battle for Paramount Communications Inc. directly to shareholders Thursday, announcing an $80-per-share cash tender offer for 51% of Paramount.
Diller's home shopping network thus increased the pressure on Paramount's board to choose between QVC's offer and that of Viacom Inc., with which Paramount originally agreed to merge.
QVC's $4.8-billion cash bid puts pressure on shareholders to tender early. If it succeeds, QVC would acquire the rest of Paramount by exchanging 1.42857 shares of QVC common stock for each of the remaining Paramount shares. At Thursday's prices, that exchange would be worth $80.71 per share, making the entire deal worth $9.5 billion.
Paramount trading was halted after the announcement and the stock closed unchanged at $76 on the New York Stock Exchange.
QVC also filed suit in Delaware to try to overturn certain "lockup" provisions that would benefit Viacom if Paramount abandons its friendly merger agreement with it.
A Paramount spokesman said, "We'll have no comment until we have an opportunity to review the tender offer."
But QVC's acts were hailed by Paramount shareholders who have chafed at Viacom's refusal to sweeten its bid.
"The Paramount board has been extremely unresponsive to an offer that I think is clearly, demonstrably superior to the current Viacom proposal," said Gordon Crawford, senior vice president of Capital Research Co., the Los Angeles-based institutional investor that holds about 8% of Paramount's shares.
"I think it's tremendously beneficial to shareholders to have a tender offer in which they can, in effect, state their preference for which offer is superior," Crawford said.
QVC said it will launch its tender offer by Wednesday. If all of Paramount's 118.5 million shares were tendered in the first stage, the pro-rated cash would be $40 per share--$10 more than the cash component offered previously by QVC and more than $30 over and above the cash component offered by Viacom.
Based on Thursday's stock prices, the Viacom bid is worth just under $7 billion. Under the merger deal announced Sept. 12, Viacom is offering just $9.10 per share in cash.
Ten days after the tender offer commences, Paramount's board is required to respond with its recommendation to shareholders and the reasons for its stance, said one mergers and acquisition specialist. It the board chooses to make no recommendation, it must state why. The tender offer must remain open for 20 business days.
Viacom had no official response, but one source said the company saw "no need to do anything right now. As (Chairman) Sumner (Redstone) has said, if the (Paramount) board thinks there's a bona fide offer, we'll probably have to deal with it."
Meanwhile, Viacom's proposal appeared Thursday to have cleared the antitrust review mandated by the federal Hart-Scott-Rodino law.
QVC's decision to launch a tender offer will entitle that company to a speedier, 15-day review under Hart-Scott-Rodino, although one of the antitrust agencies could ask for more information, stretching out the review 10 more days. But one reason for QVC's move Thursday was to initiate the necessary government reviews, which Viacom was able to do in September.
QVC feared the Paramount board would dawdle, allow Redstone to increase his bid and then recommend it as the best offer because Viacom had already obtained clearances, Diller partisans said Thursday.
But the success of QVC's tender offer depends on the Paramount board's willingness to swallow a "poison pill," which in effect would sabotage the QVC offer by flooding the market with new Paramount securities.
Under terms of the pill, adopted by Paramount's board in 1988, it can be used when a person or group acquires 15% or more of Paramount's outstanding common or announces or commences a tender offer. QVC lawyers are expected to argue that Paramount directors have already elected to waive the pill in Viacom's case, so they should treat QVC the same way.
The poison pill itself did not come under attack in the lawsuit filed Thursday in Delaware Chancery Court, but QVC lawyers did attack the lockup provisions that would pay Viacom $100 million and give it the option to acquire 20% of Paramount's stock if its merger deal is scrapped.
Times staff writer Ronald J. Ostrow in Washington contributed to this story.
The Pressure Is On
Paramount Communications Inc. stock started climbing as soon as the company went into play in early September. A rundown of the merger action and the company's share prices:
Sept. 3, 1993: Paramount stock starts climbing, spurred by rumors that Paramount may merge with Viacom Inc.
Sept. 12: Paramount and Viacom boards approve a merger agreement valued at $8.2 billion.
Sept 20: QVC Network Inc., kicks off a bidding war by offering $9.5 billion for Paramount.
Sept. 28: Blockbuster Entertainment Corp. agrees to invest $600 million in Viacom.
Oct. 4: Nynex agrees to invest $1.2 billion in Viacom.
Oct. 17: QVC's bid for Paramount is bolstered by an extra $1 billion in financing secured from Cox Enterprises Inc. and Advance Publications Inc.
Oct. 21: QVC Network Inc. launches a hostile $9.5-billion two-part tender offer for Paramount. Trading in Paramount shares was halted after the announcement.
Sources: Times reports, Bloomberg Business News
Researched by ADAM S. BAUMAN / Los Angeles Times